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Compute liability and equity elements on initial recognition

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Blacet Ltd issued Ksh 800 million 5% convertible bond through a private offer on 1st January 2019 at 4% discount. Legal and professional charges to register the bond amount to Ksh 12.8 million. The bond is convertible into equity shares on 31st December 2022 at the option of the bond holders, outstanding bonds after that date will be redeemed at 102.5%. Interest is payable annually in arrears. A fair interest rate on similar bonds without conversion option is 12%.

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Question a) Compute the liability and equity elements on initial recognition, the interest cost and the amortised cost of the liability component as at 31st December 2022

Question b) Prepare journal entries for the year to 31st December 2022

Reference no: EM132613876

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